Indonesia is among a selected group of Asian emerging markets that are plagued by a wide current account deficit (together with India and the Philippines), particularly due to these countries appetite for crude oil imports, Indonesia Investments reported. This deficit undermines investors’ confidence in Indonesian assets and thus puts pressure on the rupiah as Indonesia has become dependent on external flows to finance its external deficits (which also determine the stability of the Indonesian rupiah). Indonesia’s current account deficit was recorded at $5.5 billion, equivalent to 2.15% of the nation’s GDP, in the first quarter of 2018. This was a steep increase compared to Q1-2017 when the deficit was recorded at $2.4 billion (or 1% of GDP). Thus, Indonesia’s current account deficit more than doubled, a development that is particularly due to rapidly rising imports. Meanwhile, the full-year 2018 deficit may fall somewhere between 2.1-2.5% of GDP. Indonesian Finance Minister Mulyani Indrawati said that the Indonesian government plans to review the import of capital goods for big government projects in an effort to reduce the country’s current-account deficit.
